Assume the following for a one-year rate adjustable rate mortgage loan that is tied to the one- year Treasury rate and has monthly payments: Loan amount:150,000 Annual rate cap:2% Life-of-loan cap:5% Margin:2.75% First-year contract teaser rate:5.50% One-year Treasury rate at end of year 1:5.25% One-year Treasury rate at end of year 2:5.50% Loan term in years:30 years Given these assumptions, calculate the following: a) Initial monthly payment; b) Loan balance end of year 1; c) Year 2 contract rate; d) Year 2 monthly payment; e) Loan balance end of year 2; f) Year 3 contract rate; g) Year 3 payment.
Assume the following for a one-year rate adjustable rate mortgage loan that is tied to the one- year Treasury rate and has monthly payments: Loan amount:150,000 Annual rate cap:2% Life-of-loan cap:5% Margin:2.75% First-year contract teaser rate:5.50% One-year Treasury rate at end of year 1:5.25% One-year Treasury rate at end of year 2:5.50% Loan term in years:30 years Given these assumptions, calculate the following: a) Initial monthly payment; b) Loan balance end of year 1; c) Year 2 contract rate; d) Year 2 monthly payment; e) Loan balance end of year 2; f) Year 3 contract rate; g) Year 3 payment.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Assume the following for a one-year rate adjustable rate mortgage loan that is tied to the one- year Treasury rate and has monthly payments:
Loan amount:150,000 Annual rate cap:2% Life-of-loan cap:5% Margin:2.75% First-year contract teaser rate:5.50%
One-year Treasury rate at end of year 1:5.25%
One-year Treasury rate at end of year 2:5.50%
Loan term in years:30 years
Given these assumptions, calculate the following: a) Initial monthly payment; b) Loan balance end of year 1; c) Year 2 contract rate; d) Year 2 monthly payment; e) Loan balance end of year 2;
f) Year 3 contract rate; g) Year 3 payment.
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